Search found 133 matches

by taguscove
Tue Jan 31, 2017 11:29 am
Forum: Personal Finance (Not Investing)
Topic: Another can I afford this $2M house thread...
Replies: 70
Views: 12373

Re: Another can I afford this $2M house thread...

Thanks for the responses. Not quite what I was expecting given what I read on every other home affordability thread on here. Taguscove - It's bay area. We started with the idea of a 1.5M house 3 years ago, then 1.8, then 2.0, and now 2.3. You see where this is going. We love it here and despite HCOL it's managable with our salaries, so don't see leaving until our last kid (6 month old) is out of the house. Toto238 - We are in our earlier 30s. I've only recently had the opportunity to max 401k savings from standard 401k (18k) to 53k. Hence why my 401k is larger than DW. We currently love our jobs. I don't know if that will be the case 30 years from now. Unlikely. So trying to save as much as possible for a rainy day. I agree right now I thi...
by taguscove
Tue Jan 31, 2017 10:22 am
Forum: Personal Finance (Not Investing)
Topic: Another can I afford this $2M house thread...
Replies: 70
Views: 12373

Re: Another can I afford this $2M house thread...

The short answer is that you can afford it given your assets. It's a bit of stretch purely on income, but you have more than enough assets to make the payment comfortable.

If I were in your shoes, I'd be more comfortable with 1.5 million, but I know that this may be too constraining in parts of Manhattan, Palo Alto, and SF. It's nice to have something more than a 2BR with a family.

The valuation (buy/rent ratio) and time frame you plan to live matter a lot.

If you're currently in the Bay Area, NYC, Seattle, or Honolulu, I would rent unless you plan to stay 10+ years
If you're in another HCOL city, I would rent unless you plan to stay 5+ years
If you're in any other city, I would buy immediately.
by taguscove
Tue Jan 31, 2017 10:15 am
Forum: Investing - Theory, News & General
Topic: What are the safest Bonds after US Treasury Bonds
Replies: 27
Views: 4621

Re: What are the safest Bonds after US Treasury Bonds

Good posts already. The general answer is that for a given maturity term, look for the lowest yielding bonds. Those are deemed by the markets to be the least risky from a credit, liquidity, and exchange rate expectations perspective. In practice, the lowest yielding bonds are bonds backed by credible/stable governments that have the power to print their own currency. US Treasuries are generally considered the least risky dollar denominated investment. In a societal collapse*, no asset is safe. All financial assets fare particularly badly. Gold, food, shelter, guns, and livestock are historically the assets that retained value. Among these, only gold is easily portable. In a complete collapse/human extinction scenario, all assets go to zero ...
by taguscove
Tue Jan 31, 2017 7:25 am
Forum: Personal Finance (Not Investing)
Topic: Strategy for Purchasing a House
Replies: 21
Views: 3784

Re: Strategy for Purchasing a House

OP, a bunch of people are raising red flags and I'm inclined to agree.
- Buying vs renting: Seattle currently is one of the most favorable US cities to rent compared to buying.
- As a recent new condo owner (Boston), the taxes + hoa + repairs adds 35% above our 30 year monthly payment.

Advice if you still want to buy:
- I favor looking at a 15 year fixed or 7/1 ARM. A 30 year fixed gives substantially more interest rate risk for the lender, and they charge appropriately for that.
- Ask friends and acquaintances if there's anyone who is considering to sell. We bought through acquaintances and it was a wonderful experience avoiding realtor fees and working with people we trusted.
by taguscove
Tue Jan 31, 2017 7:14 am
Forum: Personal Consumer Issues
Topic: Take this job offer?
Replies: 3
Views: 1056

Re: Take this job offer?

The compensation looks nearly identical to me. You should try to aim for a 15% increase in pay because taking a new role is generally higher risk. You may not get along with the new team, or miss a material fact about the role. Are these roles in the same city? Negotiation: > If you haven't already, never reveal your current compensation. It seems awkward, but just learn the phrase by reading online. > Research to understand the range of compensation. Talking to someone who works there is incredibly helpful. The hiring manager is also a valuable resource. Feel free to schedule a call to understand the benefits. > You should always negotiate. As a default, I would aim at countering 10% above the offer. It's really useful to understand where ...
by taguscove
Wed Jan 25, 2017 12:19 pm
Forum: Investing - Theory, News & General
Topic: Correlations between asset classes
Replies: 14
Views: 2184

Re: Correlations between asset classes

Correlation measures are very sensitive based on the time ranges chosen. It's a huge warning sign that the periods you're comparing are uneven in both time period and years chosen.

Yes, portfolio diversification relies on correlations < 1.0, but it's largely an exercise in futility in starting with correlations to make causal inferences. There are latent factors driving the asset correlations that you almost certainly don't understand .
by taguscove
Sun Jan 22, 2017 11:42 pm
Forum: Investing - Theory, News & General
Topic: Hypo: What would you do if you were SURE of impending deline in markets
Replies: 62
Views: 7585

Re: Hypo: What would you do if you were SURE of impending deline in markets

I would sell all my equity exposures, open an Interactive Brokers account, and try to short the largest possible position with S&P500 e-mini futures.
E-mini futures would allow me to take a 20x market exposure, so a 10% decline would net me a cool +200% return.

Of course, the premise is absurd. This whole forum is built around the idea that it's difficult to beat the market with an information edge.
by taguscove
Sat Jan 21, 2017 2:17 pm
Forum: Personal Consumer Issues
Topic: Help with car buying decision
Replies: 5
Views: 814

Re: Help with car buying decision

If you can write off the expense and your finances are in order, I suggest buying the car you want.

The people above are correct that it's almost never cheaper to replace an existing car from a financial standpoint. Then again, it's almost never cheaper to buy new clothing either.
by taguscove
Fri Jan 20, 2017 8:00 am
Forum: Personal Finance (Not Investing)
Topic: Thoughts on buying a house from a colleague
Replies: 37
Views: 4866

Re: Thoughts on buying a house from a colleague

A few hours ago the dentist's wife emailed my wife a bunch of pictures and info. At the bottom of the email they listed a price of $465,000 pre-real estate agent. $485,000 put on the market with agent. Obviously I feel this is high, but also know my wife likes the house and wants me to tour when they get back from Florida. Thoughts? We bought a home directly from friends this past summer, and it was a great experience. Like the others, I agree with skipping the realtor but retaining an attorney. I'm surprised that there's such a difference between your valuation and their valuation. It's in your self interest to undervalue and their self interest to overvalue. Between zillow.com and Realtor.com, you can put together a spreadsheet of compar...
by taguscove
Thu Jan 19, 2017 10:26 am
Forum: Personal Finance (Not Investing)
Topic: Am I evaluating rental profitability correctly in terms of depreciation?
Replies: 6
Views: 844

Re: Am I evaluating rental profitability correctly in terms of depreciation?

Depreciation is an accounting abstraction that complicates the math. For real estate, depreciation is mostly used for tax purposes.

Depreciation and capital gains/losses complicate the picture. If you're getting confused, it's fine to completely ignore them.

Focus on net cash flow divided by capital invested. It's a good sign if your rental property is cash flow positive.

For example:

Rent - interest - maintenance - taxes - expenses
----------------------------------------------------------- = Annual return on investment
Total capital invested (purchase price + major capital improvements)
by taguscove
Tue Jan 17, 2017 11:07 pm
Forum: Investing - Theory, News & General
Topic: Using "worst case" portfolio results to help determine asset allocation - yea or nay?
Replies: 35
Views: 6383

Re: Using "worst case" portfolio results to help determine asset allocation - yea or nay?

Assuming the worst likely leads to an investment that's too conservative. By analogy, if I assume the worst that I'll get hit by a car while commuting, then i'd never leave home.

-37% is the worst 1 year return in recent US history, but no reason why the future can't be worse. You could imagine a nuclear war scenario where losses are greater; thankfully, stock losses are bounded by -100%. I would also look at European and Russian stocks during WW1 and WW2 for ample evidence.
by taguscove
Fri Jan 13, 2017 4:48 pm
Forum: Personal Consumer Issues
Topic: Question regarding data mining
Replies: 9
Views: 2015

Re: Question regarding data mining

If I had to recommend a single resource, it's Python Machine learning https://www.amazon.com/Python-Machine-Learning-Sebastian-Raschka/dp/1783555130 . Priorities: 1. focus on becoming proficient in a programming language above all else. Choose Python or R, not both. There's plenty of debate comparing pros and cons, but either is fine. SQL can wait until later 2. learn statistics and machine learning. hypothesis testing and understanding linear regression are core 3. learn math as you need. understanding matrix multiplication, derivatives, and integrals is a solid start. Math is incredibly broad, and it's easy to go down paths that aren't particularly applied/useful. Introductory resources: coding with Python: Zed shaw's learning python the ...
by taguscove
Thu Jan 12, 2017 9:28 am
Forum: Personal Finance (Not Investing)
Topic: Advice on salary negotiation
Replies: 9
Views: 1963

Re: Advice on salary negotiation

General background: However: *When considering my colleagues with similar positions, a few are true inspirations to me and should be compensated the highest in theory, but there are some senior people who I believe perform far below my level, and make 15 – 32% more money than me (validated), with a slightly greater bonus potential. They also are responsible for a far less amount of money. *My company does pay attention to an employee’s value, but they heavily believe in salary targets and increases in proportion to a person's age It seems like largely a waste of time to push harder in your existing company. There are organizational issues that make it difficult (large companies in particular) to be nimble and compensate top performers. Fro...
by taguscove
Wed Jan 11, 2017 8:54 am
Forum: Personal Consumer Issues
Topic: truck prices
Replies: 37
Views: 5127

Re: truck prices

A solid method is to understand what you want, then e-mail a bunch of dealers for an out the door quote. Unfortunately, the actual cost to dealers is intentionally very opaque. MSRP has long been a made up number, but that's also the case for invoice pricing now. Car makers want to have the ability to control their pricing, and any broadly published number likely doesn't represent the actual cost. Realize that new car sales isn't particularly profitable for car dealers. AutoNation Company, 2015 Full year, 223 dealerships Revenue: 14.8% parts and services 4.2% finance and insurance 57.5% new vehicles 22.9% used vehicles gross profit: 41.0% parts and services 26.6% finance and insurance 20.6% new vehicles 10.8% used vehicles src: http://phx.c...
by taguscove
Tue Jan 10, 2017 9:01 pm
Forum: Personal Consumer Issues
Topic: truck prices
Replies: 37
Views: 5127

Re: truck prices

a truckload
by taguscove
Mon Jan 09, 2017 11:09 pm
Forum: Investing - Theory, News & General
Topic: How Bad was 2008, really?
Replies: 407
Views: 64125

Re: How Bad was 2008, really?

We'll never know how bad the financial crisis could have been; most of the most severe aspects were averted through the actions of people at the US Treasury and Federal Reserve. I was working for GE Capital at the time, the world's largest equipment leasing company with a $600 Billion balance sheet, and very conservatively run. For perspective, GE Capital owned more airplanes than United Airlines and American Airlines combined. Unlike banks like Chase or Wells Fargo, GE relied on 3-6 month term commercial paper (very close in risk profile to a Certificate of Deposit). At the peak of the crisis, the entire commercial paper market froze and General Electric was a couple months from going bankrupt. In an alternate reality, I could imagine the ...
by taguscove
Mon Jan 09, 2017 5:20 pm
Forum: Investing - Theory, News & General
Topic: Over what time period should stocks NOT lose money
Replies: 50
Views: 7333

Re: Over what time period should stocks NOT lose money

betting on a diversified portfolio of stocks is inherently a bet on the continued prosperity of humanity. For the most recent hundred years, that has definitely been a good bet. Going forward is anyone's guess, and I would be very wary of anyone who seems too confident. A diversified equity/bond portfolio is a solid default position. I have heard this argument on this board a lot but folks seem to have some cognitive dissonance about bonds vs. stocks. First, I agree that the future is unknowable, so it might very well happen that the economic engine of the world (stocks) doesn't make progress. The second part is whether in that case, bonds will help you out? That's the part which has never made sense to me. Consider all the countries folks...
by taguscove
Mon Jan 09, 2017 1:23 pm
Forum: Investing - Theory, News & General
Topic: Over what time period should stocks NOT lose money
Replies: 50
Views: 7333

Re: Over what time period should stocks NOT lose money

The answers above are solid based on a Monte Carlo approach on historic US equity returns. 10 years, including dividends, is about the longest drawdown period for the USA. There is a huge survivorship bias though, that the USA was a dominant successful country in the 20-21st century. Germany, Argentina, UK, France, and China are prominent examples of major markets that experienced major disruptions from WW1 and WW2. The most recent hundred years had the biggest increase in human prosperity in the history of humanity. betting on a diversified portfolio of stocks is inherently a bet on the continued prosperity of humanity. For the most recent hundred years, that has definitely been a good bet. Going forward is anyone's guess, and I would be v...
by taguscove
Sat Jan 07, 2017 1:03 pm
Forum: Investing - Theory, News & General
Topic: A few very basic investing theory questions that have bugged me lately
Replies: 49
Views: 6800

Re: A few very basic investing theory questions that have bugged me lately

Further, some companies have huge cash hoards that help support the stock price. Apple's market capitalization is $628 billion, but they have over $200 billion in cash on hand. Apple has about 5.4 billion shares outstanding, so if it ever trades for a buck, you can kind of look at as paying $5.4 billion to get over $200 billion in cash plus a claim on future earnings. I get that, but that scenario only works if you can wrest control of the company and take the profits for yourself, absent that, those profits are just there and shareholders can't cash out their shares so short of controlling the cash reserves, what's the benefit? In other words, there's a lot of talk here of what a share entitles you to and what you own, but if you can't co...
by taguscove
Sat Jan 07, 2017 9:04 am
Forum: Personal Finance (Not Investing)
Topic: What monetary value has your education provided you?
Replies: 107
Views: 9907

Re: What monetary value has your education provided you?

Uncle Pennybags wrote:So there are no losers posting? Figures, it's like nobody loses day trading or at the casinos ether. BTW, the biggest thieves I ever had the displeasure of employing all had advanced degrees.
It's selective reporting bias and not surprising at all.

If you REALLY want to evaluate the monetary value, a net present value calculation is more appropriate. The ratio of incremental income vs costs is rife with issues (taxation treatment of income, time value of money, subsidies to education costs, etc.).

For example, my monetary value of undergrad education from Indiana University is undefined. Incremental income / free ride. hmm...
by taguscove
Sun Jan 01, 2017 11:57 am
Forum: Investing - Theory, News & General
Topic: What inflation rate do you use for your planning?
Replies: 105
Views: 12785

Re: What inflation rate do you use for your planning?

I'm surprised that people haven't brought this up. Look up breakeven inflation. 1.81% over next 5 years (https://fred.stlouisfed.org/series/T5YIE) 1.94% over next 10 years (https://fred.stlouisfed.org/series/T10YIE) Breakeven inflation is calculated from the difference in yield between US Treasury nominal and Inflation linked bonds. These are two massive and highly liquid asset classes, and reflect the best estimates of a large market of speculators. Short of asking God, I can't think of a better forecast for broad inflation. ------- By the way, what you're trying to do (forecasting expected returns in real or nominal terms) is really hard, and anyone who has a simple explanation is lying. This is from my perspective working in finance and ...
by taguscove
Tue Dec 27, 2016 9:39 am
Forum: Personal Consumer Issues
Topic: Most sustainable vehicle
Replies: 44
Views: 3964

Re: Most sustainable vehicle

More benefit <- Reduce, Reuse, Recycle -> Less benefit

I recommend a reasonably gas efficient (i.e. combined mpg > 20) used car, particularly one that otherwise would not be used.

The reality is that any new car is going to have a substantial environmental impact. Vehicle weight and price are two ballpark indicators of environmental impact. Steel/aluminum, tires, glass, and battery all require a substantial amount of resources. Debating the true accounting has a lot of grey area.

This reminds me of the paper vs plastic bag debate. The best solution is to avoid using that new bag.
By analogy, the best solution is to either bike or drive a used car.
by taguscove
Mon Dec 26, 2016 9:10 pm
Forum: Personal Finance (Not Investing)
Topic: Is it possible to graduate from college in 3 years?
Replies: 101
Views: 9084

Re: Is it possible to graduate from college in 3 years?

Yes you can graduate in 3 years. AP credits are essential. My business professor talked me out of it, and I want to thank him every time.

I highly recommend spending that time in a study abroad. The experience with dozens of international students with free time and free money was an once in a lifetime experience. I have many multiples the money now, but can never replicate that experience.
by taguscove
Mon Dec 26, 2016 12:18 am
Forum: Investing - Theory, News & General
Topic: What gets cheap when the dollar gets strong
Replies: 32
Views: 7244

Re: What gets cheap when the dollar gets strong

Exchange rates have less direct impact on company valuation than you might expect. Let's say we're investing from the perspective of a US investor. If it's a foreign business doing business in the foreign locale, currency declines proportionately negatively affect the revenue AND valuation when converted to USD. If it's a foreign business doing business in the US locale, revenue AND valuation is stable. Both go up in local currency terms, but is stable once converted to USD. Currency does have a real effect on business competitiveness though. US companies that do business internationally are hurt, while International companies doing business with US benefit. The big problem is that these factors are already priced into a reasonably efficien...
by taguscove
Sun Dec 25, 2016 12:08 am
Forum: Personal Consumer Issues
Topic: [What is safest vehicle on the road today that I can buy?]
Replies: 116
Views: 32524

Re: [What is safest vehicle on the road today that I can buy?]

I'm sorry if someone mentioned this earlier, but I would say minivans (Honda Odessey or Toyota Sienna). They check the major predictors of lower accident and fatality rates. For similar reasons, minivans have the lowest car insurance rates of any vehicle class. Conservative and experienced driver: Middle aged, not prone to road rage, drives slow. Seriously, when was the last time you saw a road raging Toyota Sienna driving 90 on the freeway. How about that F-350 truck? Responsible occupant behaviors: Wears seat belts, doesn't DUI as much or do drugs, distracted driving Relatively large and heavy passenger vehicle: As discussed earlier, simple physics favors larger vehicles Car design that emphasizes safety: Minivans often carry children and...
by taguscove
Sat Dec 24, 2016 11:30 pm
Forum: Investing - Theory, News & General
Topic: Improving the Dalio/Robbins All-Seasons Portfolio
Replies: 354
Views: 97329

Re: Improving the Dalio/Robbins All-Seasons Portfolio

General theoretical banter: This is turning into a larger discussion of EMH (Efficient Market Hypothesis). The core tenets of all weather are that: 1. assets are fairly priced by the market* 2. you are compensated for accepting systematic risk 3. Inflation and growth expectations are the core factors driving the asset classes *Asset bubbles based on human psychology is a counter example. On the whole though, the academic literature is strongly in support of a largely efficient market that's difficult to make an easy profit from mis-pricing. Regarding nedsaid's caution towards bonds: Japan and Switzerland are strong examples where bond yields could continue to drop. US 10 year treasury yield is currently 2.53% with a record low of 1.4% back...
by taguscove
Fri Dec 23, 2016 7:28 pm
Forum: Investing - Theory, News & General
Topic: Improving the Dalio/Robbins All-Seasons Portfolio
Replies: 354
Views: 97329

Re: Improving the Dalio/Robbins All-Seasons Portfolio

Investors have an almost irrational fear of leverage. They don't realize that all kinds of investments have built-in internal leverage. When McDonald's issues a bond, the company stock leverage increases. An investor who wants amplify returns (and losses) on a stable asset can take external leverage. Taking a mortgage to buy a house is a common example. Residential real estate is far less volatile than stocks, but has similar volatility once you lever up 4:1 (i.e. finance with 20% equity, 80% mortgage). It's funny to me that the same people extolling small cap stocks with high internal leverage are uncomfortable taking external leverage on a 10 year US treasury. If you want to move towards an all-weather allocation without external leverage...
by taguscove
Wed Dec 21, 2016 9:51 am
Forum: Investing - Theory, News & General
Topic: Improving the Dalio/Robbins All-Seasons Portfolio
Replies: 354
Views: 97329

Re: Improving the Dalio/Robbins All-Seasons Portfolio

What is All-Weather? ----- The all-weather portfolio is a passive investment fund that: 1. Assumes that the market of investible risky assets is generally fairly priced 2. Balances assets to be indifferent to when growth is above/below market expectations and when inflation is above/below market expectations. The Bogleheads forum seems to strongly prefer diversified equities; however, if you believe that assets are fairly valued and that you are paid to accept systemic (non-diversifiable) risk, then it's sensible to diversify beyond equities. A standard 60% stock/ 40% bond portfolio concentrates 85-90% of the risk exposure in equities because equities are inherently more volatile. Any asset (other than cash) can be levered to have stock-li...
by taguscove
Mon Dec 19, 2016 4:16 pm
Forum: Investing - Theory, News & General
Topic: Expected Future Low Returns
Replies: 49
Views: 6383

Re: Expected Future Low Returns

Going long stocks, bonds, and assets is going long on human prosperity. If you think the next 50 years will follow similar growth in prosperity as the last 50 years, then these assets are a great bet. If there is a global catastrophe such as nuclear war, disease, or AI super-intelligence displacing humans, then future returns are going to be below expectations (up to -100%). Probably the best diversification for this scenario is water, food, shelter, and weapons. The question you're asking is a fool's errand (too difficult to forecast by humans). The Boglehead philosophy is that such forecasting is too difficult, and to broadly diversify against a range of normal market scenarios. In global catastrophe scenarios, all financial assets collap...
by taguscove
Mon Dec 19, 2016 2:13 pm
Forum: Personal Finance (Not Investing)
Topic: Your Retirement Number, or, calculating the funding ratio
Replies: 205
Views: 41244

Re: Your Retirement Number, or, calculating the funding ratio

BobK I agree that funding ratio (i.e. the payment stream) is more intuitive to people than the present value. However, these methods are both simple calculations and easily convert from one number to the other. It's comparable to a home mortgage. Once you've defined the term, interest rates, and payment structure, the PV and PMT are interchangeable calculations. The real issue are the major assumptions. Term: how long do you plan to live i: what is the real-rate of return The probability distribution of term and i Both the retirement number and funding ratio also calculate on an expected value, and do not describe the range of outcomes based on varying the "term", "i" and probability distributions associated with "t...
by taguscove
Wed Dec 14, 2016 7:36 am
Forum: Investing - Theory, News & General
Topic: Are bond funds really low-risk?
Replies: 43
Views: 5044

Re: Are bond funds really low-risk?

OK, I'll just pop out one observation that should never be overlooked. The lowest safe withdrawal rates are for portfolios with too little in stocks and safe withdrawal rates are not depressed to a statistically meaningful degree when holding no bonds, certain bounds for the problem being assumed. It is an exercise for the reader to decide what kind of statement this is about "risk." Note "risk" in the abstract is a meaningless term for purposes of this discussion. So what you are saying is: High percent of bonds = low safe withdrawal rate High percent of stocks does not negatively affect safe withdrawal rates. I had a hard time parsing your statement. I want to make sure I understand. Yes. Go run FireCalc with a 4% wit...
by taguscove
Tue Dec 13, 2016 6:41 pm
Forum: Investing - Theory, News & General
Topic: Are bond funds really low-risk?
Replies: 43
Views: 5044

Re: Are bond funds really low-risk?

A common sense definition of investment risk is a combination of chance and magnitude of losing money.

Yes, bond funds are generally lower risk than stocks. There are good conceptual reasons for this.

Public companies fund their business though bonds (loans) and stocks (capital). If a company goes bankrupt, the bondholders get paid before stockholders. Within stocks, some companies are riskier than other stocks; some bonds are riskier than other bonds. Some bonds that are riskier than stocks, just as there are some children 10 and under who are taller than adults.
by taguscove
Sun Dec 11, 2016 6:45 pm
Forum: Personal Consumer Issues
Topic: Any experience with the Sleep Number bed?
Replies: 42
Views: 7788

Re: Any experience with the Sleep Number bed?

I felt compelled to register to make a reply. A lot of the traditional major mattress companies have a car dealership model that makes the product excessively opaque and complicated. Sleep Number is generally considered at the high end of the traditional mattress channel Over the past 5 years, there is a new direct mattress model that provides excellent mattresses and cuts the intermediate markups. https://www.amazon.com/Tuft-Needle-TN23Q-Mattress-Queen/dp/B00QBZ265U https://www.amazon.com/Brooklyn-Bedding-Latex-Mattress-Medium/dp/B00XZO2O6Q I found this resource useful: https://www.themattressunderground.com The whole mattress industry feels excessively complicated, but these direct mattress makers are the most straightforward of them. I r...